Auditing and reconciling custodial accounts

ABSTRACT

A method, system and computer program product for auditing and reconciling custodial accounts. A tool is provided to allow a custodial agent to audit a custodial account at one or more depository institutions at which deposits are held by the custodial agent on behalf of one or more individuals and reconcile such accounts. According to one embodiment, the method includes comparing account balance data from a depository institution for a custodial account against account balance data from a second source for the custodial account, identifying discrepancies between the balance data from the depository institution and the balance data from the second source, identifying a prospective write-off in the amount of one or more of the discrepancies, and prompting the custodial agent to indicate whether the custodial agent accepts the prospective write-off. The prospective write-off may be offset against an account.

BACKGROUND OF THE INVENTION

1. Field of the Invention

The present invention relates generally to the management of financialaccounts and more particularly, to a method, system and computer programproduct for auditing and reconciling custodial accounts.

2. Background Art

Through a custodial arrangement, deposit accounts may be established atone or more depository institutions by an agent and/or custodian onbehalf of its customers. (Such deposit accounts are referred to hereinas “custodial deposit accounts.”) The agent and/or custodian responsiblefor establishing and holding such deposit accounts may be, for example,a broker-dealer registered under the Securities Exchange Act of 1934 asamended (referred to herein as a “broker-dealer”), a bank, a creditunion, or another regulated financial institution. (Such agent and/orcustodian is referred to herein as a “custodial agent”). For example, abroker-dealer may automatically invest, or “sweep,” funds (e.g., freecredit balances) from a customer's brokerage account intointerest-bearing deposit accounts, which may be, or include, a moneymarket deposit account. If funds are needed by the customer to settlesecurities transactions or cash management activity, funds are withdrawnby the broker-dealer to cover such transactions.

In some banking systems around the world, deposit accounts are insuredby government-run deposit insurance programs up to an establisheddeposit insurance limit. In the United States, for example, the currentfederal deposit insurance limit is generally $100,000 per depositor (ineach insurable capacity) in any one insured depository institution.Custodial agents wishing to offer their customers government-backedinsurance in excess of the established insurance limit have limitedoptions. One option is for the custodial agent to place customer fundsin a network of depository institutions in amounts that do not exceedthe deposit insurance limit for each customer at each depositoryinstitution, permitting customer funds to be eligible for insurancecoverage in excess of the basic $100,000 limit.

These sweep arrangements benefit depository institutions in the banknetwork, by providing a large, stable source of deposits. Bank reserverequirements can be managed by utilizing a dual deposit accountstructure. Each custodial agent establishes a money market depositaccount (“MMDA”) and a transaction account (“TA”) with each depositoryinstitution in the name of the custodial agent as agent and/or custodianfor its customers (the “Custodial MMDA” and the “Custodial TA”). Eachcustomer's MMDA and TA are evidenced by books and records maintained bythe custodial agent (the “Customer MMDA” and the “Customer TA”).

The Customer MMDA serves as the customer's primary deposit account andis the source of funds for the Customer TA. In order to comply withbanking regulations, fund withdrawals to outside entities are directedfrom the Customer TA. In the United States, for example, Regulation D ofthe Board of Governors of the Federal Reserve System (“Regulation D”)limits transfers from an MMDA account to six per month. This limit canbe managed, for example, by transferring the entire Customer MMDAaccount to the Customer TA before the customer exhausts the monthlylimit. Such transfers allow the customer to retain access to all cash inhis or her deposit account. Transfers from the Custodial MMDA to theCustodial TA may exceed the six transfers per month restriction inRegulation D so long as each Customer MMDA complies with therestriction. Regulation D compliance is accomplished by enforcement ofthe transfer and withdrawal restrictions by the custodial agent withrespect to each Customer MMDA.

Notwithstanding the above-described benefits, however, such custodialarrangements create complexities for both the custodial agent and thedepository institution. There exists a need, therefore, for a method andsystem for auditing and reconciling such custodial accounts.

BRIEF SUMMARY OF THE INVENTION

The present invention is directed to a method, system and computerprogram product for auditing and reconciling custodial accounts.According to the present invention, a tool is provided to allow acustodial agent to audit activity and balances in one or more custodialaccounts at one or more depository institutions at which deposits areheld by the custodial agent on behalf of one or more individuals andreconcile such accounts.

In one embodiment a method, system and computer program product areprovided for reconciling a custodial account held at a depositoryinstitution by a custodial agent on behalf of one or more individuals.The method comprises the steps of comparing account balance data fromthe depository institution for the custodial account against accountbalance data from a second source for the custodial account, identifyingdiscrepancies between the balance data from the depository institutionand the balance data from the second source, identifying a prospectivewrite-off in the amount of one or more of the discrepancies, andprompting the custodial agent to indicate whether the custodial agentaccepts the prospective write-off. The method may also include the stepof allowing the custodial agent to not accept the prospective write-off.The prospective write-off may be an offset against an account, such asan offset against a fee charged to the depository institution by thecustodial agent. Account balance data from the second source may bederived from transaction data for a customer account of the one or moreindividuals prior to the comparing step. The depository institution maybe one of a network of banks at which deposits are held by the custodialagent on behalf of the one or more individuals. Further steps accordingto the method may include selecting the depository institution from aplurality of depository institutions at which deposits are held by thecustodial agent on behalf of the one or more individuals and/orselecting the custodial account from one or more custodial accounts heldat a plurality of depository institutions by the custodial agent.

In a second embodiment a method, system and computer program product areprovided for auditing a custodial account held at a depositoryinstitution by a custodial agent on behalf of one or more individuals.The method comprises deriving account balance data for the custodialaccount from transaction data for a customer account of the one or moreindividuals, comparing the derived account balance data against accountbalance data for the custodial account from the depository institution,identifying discrepancies between the account balance data from thedepository institution and the derived account balance data, anddisplaying the discrepancies. A prospective write-off may be identifiedin the amount of one or more of the discrepancies and the custodialagent may be prompted to indicate whether the custodial agent acceptsthe prospective write-off. The depository institution may be one of anetwork of banks at which deposits are held by the custodial agent onbehalf of the one or more individuals.

BRIEF DESCRIPTION OF THE DRAWINGS/FIGURES

The accompanying drawings, which are incorporated herein and form a partof the specification, illustrate the present invention and, togetherwith the description, further serve to explain the principles of theinvention and to enable a person skilled in the pertinent art to makeand use the invention.

FIG. 1 is a block diagram of an exemplary deposit sweep arrangementaccording to the present invention.

FIG. 2 is block diagram of an exemplary dual blind source reconciliationsystem according to the present invention.

FIG. 3A is a flowchart illustrating a process for reconciling acustodial account held at a depository institution by a custodial agenton behalf of one or more individuals according to an embodiment of thepresent invention.

FIG. 3B is a flowchart illustrating a process for auditing a custodialaccount held at a depository institution by a custodial agent on behalfof one or more individuals according to an embodiment of the presentinvention.

FIG. 4 is an exemplary screen shot generated by the user interface ofthe present invention.

FIG. 5 is another exemplary screen shot generated by the user interfaceof the present invention.

FIG. 6 is another exemplary screen shot generated by the user interfaceof the present invention.

FIG. 7 is another exemplary screen shot generated by the user interfaceof the present invention.

FIG. 8 is another exemplary screen shot generated by the user interfaceof the present invention.

FIG. 9 is another exemplary screen shot generated by the user interfaceof the present invention.

FIG. 10 is another exemplary screen shot generated by the user interfaceof the present invention.

FIG. 11 is another exemplary screen shot generated by the user interfaceof the present invention.

FIG. 12 is another exemplary screen shot generated by the user interfaceof the present invention.

FIG. 13 is another exemplary screen shot generated by the user interfaceof the present invention.

FIG. 14 is another exemplary screen shot generated by the user interfaceof the present invention.

FIG. 15 is another exemplary screen shot generated by the user interfaceof the present invention.

FIG. 16 is another exemplary screen shot generated by the user interfaceof the present invention.

FIG. 17 is another exemplary screen shot generated by the user interfaceof the present invention.

FIG. 18 is another exemplary screen shot generated by the user interfaceof the present invention.

FIG. 19 is another exemplary screen shot generated by the user interfaceof the present invention.

FIG. 20 is another exemplary screen shot generated by the user interfaceof the present invention.

FIG. 21 is another exemplary screen shot generated by the user interfaceof the present invention.

FIG. 22 is another exemplary screen shot generated by the user interfaceof the present invention.

FIG. 23 is another exemplary screen shot generated by the user interfaceof the present invention.

FIG. 24 is a block diagram of an exemplary computer system useful forimplementing the present invention.

DETAILED DESCRIPTION OF THE INVENTION

An exemplary embodiment of the present invention is now described withreference to the figures, where like reference numbers indicateidentical or functionally similar elements. This is for convenience onlyand is not intended to limit the application of the present invention.In fact, after reading the following description, it will be apparent toone skilled in the relevant art(s) how to implement the followinginvention in alternative embodiments. While the following embodiment isdirected to a deposit sweep arrangement between a broker-dealer and oneor more of its customers, it will be understood that this is anembodiment of the present invention and that the present invention canbe applied in other arrangements where a custodial agent is an agent andor custodian for one or more individuals. Additionally, while thefollowing embodiment is directed to the auditing and reconciliation ofone or more custodial accounts held at one or more depositoryinstitutions in a network of depository institutions, it will beunderstood that the present invention also has applicability to one ormore custodial accounts held at a single depository institution onbehalf of one or more individuals.

In one embodiment, the present invention provides a system, method andcomputer program product for auditing and reconciling bank deposits heldat one or more depository institutions on behalf of customers of abroker-dealer acting as the custodial agent (CA) for such customers. Areconciliation toolkit is provided to allow the custodial agent to auditactivity and balances in deposit accounts at one or more depositoryinstitutions in a bank network and reconcile such accounts. Smalldiscrepancies (out of balance conditions) can be identified and, ifdesired, written off to achieve a balanced reconciled state in a costeffective and efficient process. Discrepancies may be offset against anaccount, for example, offset against a fee account maintained betweenthe depository institution and the custodial agent. A fee settlementactivity summary is also provided, detailing monthly fee activities andwrite-offs. The reconciliation toolkit also provides depositoryinstitutions in the bank network with a sophisticated interest accrualengine and reporting system, to insure that network banks understand andcomply with the operational needs of the custodial agent.

FIG. 1 is a block diagram providing an overview of the flow of customerfunds in an exemplary deposit sweep arrangement 100 according to thepresent invention. Deposit sweep arrangement 100 includes abroker-dealer back office service provider 102, a deposit sweep engine104, a settlement agent 106 and one or more depository institutions 108.

As described above, in one embodiment, each custodial agent establishesan MMDA and a TA with each depository institution in the name of thecustodial agent as agent and/or custodian for one or more customers (the“Custodial MMDA” and the “Custodial TA”). Each customer's MMDA and TAare evidenced by books and records maintained by the custodial agent(the “Customer MMDA” and the “Customer TA”). The Customer MMDA serves asthe customer's primary deposit account and is the source of funds forthe Customer TA. In order to comply with banking regulations, fundwithdrawals to outside entities are directed from the Customer TA andthe entire Customer MMDA account is transferred to the Customer TAbefore the customer exhausts the monthly transfer limit. For example,transfers from the Custodial MMDA to the Custodial TA may exceed the sixtransfers per month restriction in Regulation D so long as each CustomerMMDA complies with the restriction. Regulation D compliance isaccomplished by enforcement of the transfer and withdrawal restrictionsby the custodial agent with respect to each Customer MMDA.

In one embodiment, each depository institution agrees to pay an “all-inrate” in respect of the money held in the custodial accounts. Forexample, the “all-in rate” may be a Fed Funds Effective Rate plus a setbasis point spread. This “all-in rate” can then be allocated intointerest to be paid into the customer MMDA account and fees charged tothe depository institution by the custodial agent and/or others involvedin the maintenance and operation of the deposit sweep arrangement.

Back office service provider 102 collects brokerage activity and cashmanagement activity of customers of the broker-dealer and transmits netcustomer transactions to sweep engine 104. Sweep engine 104 performs adaily sweep, for example, at night. Sweep engine 104 optimizes sweptbalances for FDIC insurance coverage and bank network requirements.Sweep engine 104 transmits aggregate transactions to settlement agent106. Settlement agent 106 provides an interface to the bank network onan aggregate level (e.g. custodial level rather than customer level).Settlement agent 106 sends aggregate funds flow to one or moredepository institutions 108 in the bank network. Settlement agent 106processes aggregate transactions daily, for example, at night. Aggregatefunds are invested in custodial accounts (MMDA/TA accounts) at eachdepository institution 108.

In accordance with an embodiment of the invention, communication ofinformation between the various components of deposit sweep arrangement100 is accomplished over a network consisting of electronic devicesconnected either physically or wirelessly, wherein digital informationis transmitted from one device to another. Such devices may include, butare not limited to, a desktop computer, a laptop computer, a handhelddevice or PDA, a telephone, a set top box, an Internet appliance, or thelike. Exemplary networks include a Local Area Network, a Wide AreaNetwork, an organizational intranet, the Internet, or the like. Thefunctionality of an exemplary computer and network are further explainedin conjunction with FIG. 24, below.

As shown in FIG. 2, according to an embodiment of the present invention,two independent data sources are maintained. On one side, the custodialagent sends net customer activity 202 (single net transaction percustomer account) and deposit sweep engine 104 produces a series ofaggregate transactions 204 (executed by settlement agent 106). Foraccounting purposes, sweep engine 104 also derives TA and MMDA balancesand accrued interest data 206 for each depository institution 108 inbank network 210, for example by calculations made by applying the“all-in rate” agreed to between the depository institution and thecustodial agent to the daily customer transaction data. On the otherside, depository institutions 108 in the bank network 210 are requiredto provide a “blind” report 212 of the balances and accrued and paidinterest 214 for each custodial account (MMDA and TA), for example, atthe start of each day. A reconciliation toolkit 220 is provided forcustodial agents to manage, approve & store daily reconciliation of thecustodial accounts. In one embodiment, bank report 212 is independentlycompared to data 206 generated by sweep engine 104. In one embodiment,each day authorized personnel from the CA must log-on to affirm thereconciliation of these two independent data sources as having beenmonitored and verified. Discrepancies can be surfaced and/or resolved.In one embodiment, in order to reduce costs and provide an efficientmeans of reconciling each custodial account, prospective write-offs maybe identified to resolve such discrepancies, rather than conducting athorough investigation of the origin of the discrepancy. Such a processmay be desirable where the discrepancy is minimal and furtherinvestigation would not be cost effective. In such an embodiment, the CAis required to approve, postpone or decline prospective write-offs.

The reconciliation toolkit of the present invention is one component ofa larger system balancing process. System balancing is performed both ona system-wide and sweep client specific reconciliation basis. Thebalancing process is comprised of individual balancing steps thatconclude in a system-wide balancing process. This method allows for theperformance of full-circle system balancing daily, thus vastly reducingthe likelihood of an out-of-balance activity lasting longer than a day.The goals are to ensure that the daily activity from back office serviceprovider 102 is accepted, processed, posted and settled, and that thecustodial agent is provided with information to balance the customerbalances (MMDA and TA) and any fees to the depository institutions'all-in balances. The balancing process produces electronic output thatcan be passed to the custodial agent as part of a daily system reportsdistribution.

System balancing is divided into five phases that serve as buildingblocks on each other starting with the net daily activity received fromback-office service provider 102 and concluding with settlement agent106 reconciliation. By dividing this process into phases it is possibleto detect an out-of-balance condition before starting the end of dayfunds transfer process.

The first phase balances the data received from the broker-dealer backoffice service provider against the data accepted by the sweep engine.All inbound activity files contain a trailer record that stores thenumber of records on the file and the total of all debit and credittransactions. During the file processing and parsing process, the threedata values referenced are internally computed and stored. When theinbound activity file processing is complete the internally computedrecord count, aggregated debit and credit transactions are matched tothe values stored on the inbound trailer record. These values must be inagreement for processing to continue.

After the inbound activity file is successfully balanced, the sweepengine will begin core processing or allocation of the net dailyactivity. A second balancing phase occurs during the allocation andposting process, when the sweep engine internally counts the number oftransactions received and accumulates the value of credits and debitsreceived. At the conclusion of the processing, these values are comparedagainst the retained control totals from an internal transmissionbalancing process. This is done to confirm that all transactionsprovided to the sweep engine have either been posted to the account or,in the case of an error, duly reported.

As a result of the allocation and posting processing, the sweep enginewill create a funds transfer report detailing the allocation of thedaily activity among the various depository institutions. As a thirdbalancing phase, the total sum of funds allocated across thesedepository institutions should balance to the net total of credits anddebits processed in the allocation and posting phase.

After the final allocation and posting of daily activity transactions,the settlement agent will receive an electronic transmission of wireinstructions from or on behalf of the custodial agent. The wires will beposted to a settlement account pending transmissions to/from thedepository institutions. A fourth balancing phase occurs at theconclusion of the day, when the settlement account is reconciled tovalidate that all transmissions have been completed and that expectedfunds from the depository institutions were received. The net balance ofthe settlement account should equal the net total on an expected fundssettlement balancing report.

On the day following system processing, the custodial account balancesand accrued interest from the depository institutions will be obtainedfor balancing against the derived aggregate deposit balances (e.g. ascalculated by applying the all-in rate to the customer account balances)stored within the sweep engine. The first three phases of reconciliationdescribed above can be monitored and verified by a series of dailyreports. The settlement agent contracts with the custodial agent toperform the fourth level of reconciliation described above utilizingstandard reconciliation processes which include daily verification of“zero balances” in all settlement accounts.

Finally, the fifth balancing phase utilizes the reconciliation toolkitof the present invention to facilitate direct communication, dailybalancing and archival between the custodial agent and the networkbanks.

FIG. 3A provides a flowchart illustrating a process 300 for reconcilinga custodial account held at a depository institution by a custodialagent on behalf of one or more individuals, according to one embodimentof the present invention.

At step 302, account balance data received from the depositoryinstitution is compared against account balance data received from asecond source, for example, an independent second source, such as thesweep engine. For example, broker-dealer customers A and B may each have$1 million in free credit balances in their customer account. The sweepengine breaks each customer's swept balance into amounts of $100,000each for deposit at ten different depository institutions. Thecomparison is between the aggregated deposits in the customer depositaccounts ($1 million each for A and B) and the disaggregated deposits inthe custodial deposit accounts (for example, $200,000 at each of tenbanks, assuming there are only two customers, ten banks and each banktakes $100,000). Accrued interest and other factors may also be takeninto account. In one embodiment, custodial account balances (MMDA andTA) and accrued interest data received from the depository institutionare compared to the aggregate deposit balances and derived accruedinterest balances calculated by the sweep engine. At step 304,discrepancies between the account balance data from the depositoryinstitution and the account balance data from the second source areidentified. Such discrepancies may include positive or negative out ofbalance conditions. At step 306, a write-off is identified in the amountof one or more of the discrepancies. In one embodiment, the prospectivewrite-off is offset against an account. For example, the prospectivewrite-off may be offset against a fee account between the depositoryinstitution and the custodial agent, tracking fees charged to thedepository institution by the custodial agent. Alternatively, a separateaccount may be maintained to offset daily discrepancies, which can thenbe satisfied on a daily or monthly basis (for example, a check can bewritten to cover a negative daily or monthly balance in the offsetaccount). In one embodiment, the second source (e.g. sweep engine) isconsidered accurate and write-offs are applied to the data received fromthe depository institution to force a reconciliation. At step 308, thecustodial agent is prompted to indicate whether it accepts theprospective write-off. For example, the custodial agent may indicateacceptance of the prospective write-off if the discrepancy is small.Alternatively, the custodial agent may choose to decline or postpone theprospective write-off, for example, if the discrepancy is large.

The reconciliation toolkit of the present invention may also be usedsimply for auditing a custodial account held at a depository institutionby a custodial agent on behalf of one or more individuals. FIG. 3Bprovides a flowchart illustrating a process 350 for auditing a custodialaccount held at a depository institution by a custodial agent on behalfof one or more individuals, according to one embodiment of the presentinvention.

At step 352 an “all-in” balance is derived from transaction datareceived by the sweep engine. In one embodiment, the all-in balance mayconsist of principal, interest to be paid to the customer of thecustodial agent and one or more fees charged to the depositoryinstitution, such as a custodial agent fee and/or other fees. Thisall-in balance corresponds with the all-in balance of the custodialaccount reported by the depository institution, after applying the“all-in rate” agreed to by the custodial agent and the depositoryinstitutions at the initiation of the deposit sweep arrangement. Asdiscussed above, each depository institution agrees to pay an “all-inrate” on the money held in the custodial accounts. For example, the“all-in rate” may be a Fed Funds Effective Rate plus a set basis pointspread. This “all-in rate” can then be divided up by the custodial agentinto interest to be paid to the customer of the custodial agent and feesto be charged to the depository institution. As would be apparent to oneskilled in the art, an all-in balance can be calculated from transactiondata received by the sweep engine. At step 354, the derived balance datais compared against account balance data for the custodial accountreceived from the depository institution. At step 356, discrepanciesbetween the account balance data from the depository institution and thederived balance data are identified. At step 358, any discrepancies aredisplayed. Discrepancies may include positive or negative amounts or maybe zero. For example, as discussed below, the principal balance, accruedinterest and paid interest for the custodial accounts (MMDA and TA) aredisplayed, both as calculated by the sweep engine and as reported by thedepository institution. The custodial agent is then able to audit andreconcile the custodial account. As discussed above, a prospectivewrite-off may also be identified in the amount of one or more of thediscrepancies and the custodial agent will receive a prompt to indicatewhether the custodial agent accepts the prospective write-off. Theprompt may include an option to postpone acceptance or non-acceptance.For example, on login, any unreconciled events may appear at the top ofthe user interface to prompt the user to reconcile the discrepancy.Alternatively, a custodial agent, administrator, other person, or someother combination of persons, may be notified by email of unreconciledevents and a link may be provided to a reconciliation page (subject tosecure access).

User interfaces may be used by one or more users to view the informationprovided by the reconciliation toolkit. User interfaces may providedifferent views of the information to different users. The differentviews of the information represented by such user interfaces areexplained in detail in conjunction with FIGS. 4-23, below. Userinterfaces may be a graphical user interface or web-based user interfaceimplemented by using, for example, Hyper Text Markup Language (HTML)documents, java applets, javascripts, Active Server Pages (ASP), CommonGateway Interface (CGI) scripts, extensible markup language (XML),dynamic HTML, Cascading Style Sheets (CSS), plug-ins, or the like.Access to the reconciliation toolkit for both depository institutionsand custodial agents is, for example, via a secure web interface onlyaccessible by authorized personnel. An administrative interface may alsobe provided for maintenance of the system.

Referring to FIG. 4, an exemplary display screen or window (hereinafter“screen shot”) 400 generated by a user interface according to thepresent invention is shown providing a user login. For example, a securelogin to the reconciliation toolkit is required, controlled by strongpasswords requiring a mixture of uppercase, lowercase, numbers andsymbols. User access credentials are stored in an underlying userdatabase in an encrypted format. Access to the reconciliation toolkitmay be tailored to the various roles a user can assume within the system(e.g. custodial agent, depository institution, administrator, etc.). Inone embodiment, only the available functions are shown. Thereconciliation toolkit may have no limit or a limit on the number ofauthorized users.

Referring to FIG. 5, another exemplary screen shot 500 generated by auser interface according to the present invention is shown. Inaccordance with an embodiment of the invention, FIG. 5 is a view of thereconciliation toolkit as presented to a custodial agent. After login, acustodial agent is presented with the option of accessing a dailydepository institution reconciliation summary, monthly fee settlementactivity or a daily depository institution reconciliation recap. Thecustodial agent may also perform user management and search within thedata maintained by the reconciliation toolkit. Breadcrumb navigation,context sensitive list style menus and quick access buttons along thetop of the interface may allow for quick and simple access to commonfunctions.

Referring to FIG. 6, an exemplary daily depository institutionreconciliation summary screen shot 600 generated by a user interfaceaccording to the present invention is shown. This screen serves as thedoorway to all of the detailed reconciliation information. Current, openand un-reconciled positions are bubbled to separate areas of theinterface for quick review and past reconciliations can be searched andaccessed by a variety of dynamic criteria. The custodial agent canselect a depository institution from a plurality of depositoryinstitutions at which deposits are held by the custodial agent on behalfof one or more of its customers.

Referring to FIGS. 7-8, exemplary daily depository institutionreconciliation detail windows or screen shots 700, 800 generated by auser interface according to the present invention are shown. Visual cuesmay be used to help the user to make the complex information presentedmore intuitive. For example, as shown in FIG. 7, upon entering thisreview function, out of balance conditions are immediately apparent. Theapproval function is “grayed out” while error conditions exist. Acustodial agent may postpone reconciliation to conduct additionalresearch. Notes can be added to any day's reconciliation activities forfuture review. A full audit trail is embedded into all actions as well.Small balance discrepancies may be written off to an account, such as acustodial agent fee account, as shown. The upper and/or lower limits forsuch write-offs are adjustable by each custodial agent.

As shown in FIG. 7, discrepancies between the account balance data fromthe depository institution and the calculated account balance data areidentified. For example, as shown, the reported MMDA principal balanceis $100.00 greater than the calculated MMDA principal balance; thereported MMDA month to date accrued interest is $10.00 less than thecalculated month to date accrued interest; and the TA principal balanceis $200.00 less than the calculated TA principal balance. Prospectiveoffsets against fees in the amounts of these discrepancies areidentified.

As shown in FIG. 8, once the adjustments have been “written-off” to thefee calculations the error statuses are now clear and the entries are inbalance. The Approval button is now available for processing. A messageunderneath the approval button indicates that this has been enabled viaa fee write-off.

Referring to FIG. 9, an exemplary daily depository institutionreconciliation recap screen shot 900 generated by a user interfaceaccording to the present invention is shown. Once the adjustments havebeen approved, the recap screen is updated to reflect the finalreconciled state including any fee write-offs. Both the interim and anyfinal status of this screen may be stored for future review however,once approved the reconciliation is final and no further activity can beaccomplished without administrator intervention.

Referring to FIG. 10, an exemplary daily balance and interest calculatorscreen shot 1000 generated by a user interface according to the presentinvention is shown. The Daily Balance and Interest Calculator presents adynamic online statement for each daily account position. Network banksand custodial agents are able to review the precise account activitiesand interest accrual/payment information used to derive/calculate thedaily balances. The sophisticated interest accrual engine and reportingsystem insures that network banks understand and comply with theoperational needs of the deposit sweep service. Banks pay interestdirectly to the custodial deposit accounts. Interest is typicallyaccrued daily and paid at month end. The system may be designed toreadily support a variable period end date for each month which can becustomized by the custodial agent. In the event that individual clientaccounts are fully redeemed intra-month, the interest is paid for thataccount (and relieved from the accrual) on the date of the redemption.Interest is also paid when the customer MMDA account “dumps” to thecustomer TA (in the event that the client has exceeded six transactions)to insure that a later intra-month full redemption would have access tothe paid interest for the “dumped” account. For example, as discussedabove, banks in the network pay an all-in rate. This rate can then beallocated as desired by the custodial agent, for example, into customerinterest and fees charged to the depository institution by the custodialagent.

FIG. 11 shows an exemplary monthly fee settlement activity screen shot1100 generated by a user interface according to the present invention.For each month, a summary of all of the various fee activities at eachbank may be provided, which includes a summary of any fee write-offsnecessary to force a reconciliation. Custodial agent fees are detailedas well as any other fees charged to the depository institution.

In one embodiment, the reconciliation toolkit of the present inventionautomatically archives all activities, for example, for a period ofseven years, to aid in future audit and review needs. The system of thepresent invention also calculates, manages and archives fee settlementactivities for each month. A detailed view of each daily fee calculationat each bank may also archived and retrievable, for example, for up toseven years.

A detailed view of all of the calculations that roll-up to the monthlyfee settlement is also available by day. FIG. 12 shows an exemplarydaily depository institution reconciliation recap screen shot 1200generated by a user interface according to the present invention. Itincludes rate information used in the calculations including fed fundand custodial agent margin and continues to reflect detailed informationon fee write-offs.

The daily depository institution reconciliation recap screen can beviewed for each of the depository institutions at which deposits areheld by the custodial agent on behalf of one or more of its customers.

FIG. 13 shows an exemplary user management screen shot 1300 generated bya user interface according to the present invention. In one embodiment,a robust user and policy management system is provided, to enable thecustodial agent to administer their own security. “Read-Only” users maybe supported, that can view but not alter reconciliation data.Additionally, one or more administrative users can be designated, tomanage the security policy for a given company.

Referring to FIG. 14, an exemplary application access screen shot 1400generated by a user interface according to the present invention isshown. Access to applications, functions and limits may be controlledvia the granting of “User Security Keys”. For example, the limit on theamount a user can “write off” to fees can be set to “0” to effectivelydisallow fee write-offs and set to a specific maximum dollar amount, toallow fee write-offs for discrepancies below that dollar amount. Duringthe reconciliation process, a user may be reminded that a balancediscrepancy exceeds their write-off authority and the write-off approvalfunction is temporarily disabled.

FIG. 15 shows an exemplary auditing screen shot 1500 generated by a userinterface according to the present invention. In one embodiment, thereconciliation toolkit is designed to track virtually every event a userundertakes in the system. A robust reporting mechanism allows for reviewof system activity by event type, user, and date range. The system mayalso be designed to store the before and after state of variousinformation as the event is executed.

Referring to FIG. 16, another exemplary screen shot 1600 generated by auser interface according to the present invention is shown. Inaccordance with an embodiment of the invention, FIG. 16 is a view of thereconciliation toolkit as presented to a depository institution. Aseparate and very limited menu of functions is exposed to the typicaldepository institution. In one embodiment, like the custodial agent, thedepository institution can review open as well as past submissions ofthe information they provide in the reconciliation process, however,once reviewed and reconciled by the custodial agent, the depositoryinstitution may no longer make edits and the information is marked as“read-only”.

FIG. 17 shows an exemplary daily balance recap screen shot 1700generated by a user interface according to the present invention. Recentbalance entries are displayed as well as their reconciliation status.Each entry may be reviewed by the depository institution.

As discussed above, the depository institution is required to provide a“blind” report of the balances, accrued and paid interest for eachcustodial account (MMDA and TA) at the start of each day, for example,by 9 AM. In one embodiment, the depository institution is also requiredto affirm regulatory compliance, such as with respect to capitalizationand rate disclosures. FIG. 18 shows an exemplary daily balancecollection screen shot 1800 generated by a user interface according tothe present invention.

Daily funds instructions may also be provided to the depositoryinstitution through the reconciliation toolkit. The funding instructionsinform that depository institution as to the settlement amounts itshould expect to receive from the settlement agent. Using the DailyBalance and Interest Calculator shown in FIG. 10, the depositoryinstitution may capitalize month to date accrued interest for both theMMDA and TA and provide the custodial agent with a monthly end accountbalance statement.

Underlying the reconciliation toolkit is a series of administrativefunctions that are available only to a system administrator. Referringto FIG. 19, another exemplary screen shot 1900 generated by a userinterface according to the present invention is shown. In accordancewith an embodiment of the invention, FIG. 19 is a view of thereconciliation toolkit as presented to a system administrator.

FIG. 20 shows an exemplary entity and user management screen shot 2000generated by a user interface according to the present invention. Herethe various parameters of the reconciliation toolkit can be configured.

On demand reports may be generated for the system administrator. FIG. 21shows an exemplary administrator reporting screen shot 2100 generated bya user interface according to the present invention. The systemadministrator preferably knows immediately about error conditions in thesystem through a robust reporting and email notification system, so thatthey can be working on a resolution to problems before they are broughtto the custodial agent's attention. For example, as shown in FIG. 21,the system administrator is being “nagged” by a critical errorcondition, a Fed Funds Rate report is missing.

FIG. 22 shows an exemplary balance mismatch reporting screen shot 2200generated by a user interface according to the present invention.Potential balance mismatches are only one such notification that istracked by the reconciliation toolkit. In one embodiment, a systemadministrator may assume the role of any network bank or custodial agentto correct system problems. These actions are reflected asadministrative intervention on the various audit reports.

The system administrator may also use the reconciliation toolkit toestablish new custodial agent relationships and manage existingcustodial agent relationships. FIG. 23 shows an exemplary custodialagent management screen shot 2300 generated by a user interfaceaccording to the present invention.

The present invention (i.e., components of deposit sweep arrangement 100(e.g. back office service provider 102, deposit sweep engine 104,settlement agent 106), process 300, process 350 or any parts orfunctions thereof) may be implemented using hardware, software or acombination thereof and may be implemented in one or more computersystems or other processing systems. However, the manipulationsperformed by the present invention are often referred to herein interms, such as comparing or identifying, which are commonly associatedwith mental operations performed by a human operator. No such capabilityof a human operator is necessary, or desirable in most cases, in any ofthe operations described herein which form part of the presentinvention. Rather, the operations are machine operations. Usefulmachines for performing the operation of the present invention includegeneral purpose digital computers or similar devices, such as a computersystem 2400, as shown in FIG. 24.

FIG. 24 illustrates one or more processors, such as processor 2404.Processor 2404 can be a special purpose or a general purpose digitalsignal processor. The processor 2404 is connected to a communicationsinfrastructure 2406 (for example, a communication bus or network).Various software implementations are described in terms of thisexemplary computer system. After reading this description, it willbecome apparent to a person skilled in the relevant art how to implementthe invention using other computer systems and/or computerarchitectures.

Computer system 2400 can include a display interface 2402 that forwardsgraphics, text, and other data from communication infrastructure 2406(or from a frame buffer not shown) for display on a display unit 2403.

Computer system 2400 also includes a main memory 2408, preferably randomaccess memory (RAM), and may also include a secondary memory 2410. Thesecondary memory 2410 may include, for example, a hard disk drive 2412and/or a removable storage drive 2414, representing a floppy disk drive,a magnetic tape drive, an optical disk drive, etc. The removable storagedrive 2414 reads from and/or writes to a removable storage unit 2418 ina well known manner. Removable storage unit 2418, represents a floppydisk, magnetic tape, optical disk, etc. which is read by and written toby removable storage drive 2414. As will be appreciated, the removablestorage unit 2418 includes a computer usable storage medium havingstored therein computer software and/or data.

In alternative implementations, secondary memory 2410 may include othersimilar means for allowing computer programs or other instructions to beloaded into computer system 2400. Such means may include, for example, aremovable storage unit 2422 and an interface 2420. Examples of suchmeans may include a program cartridge and cartridge interface, aremovable memory chip (such as an erasable programmable read only memory(EPROM), flash memory, or programmable read only memory (PROM)) andassociated socket, and other removable storage units 2422 and interfaces2420 which allow software and data to be transferred from the removablestorage unit 2422 to computer system 2400.

Computer system 2400 may also include a communications interface 2424.

Communications interface 2424 allows software and data to be transferredbetween computer system 2400 and external devices. Examples ofcommunications interface 2424 may include a modem, a network interface(such as an Ethernet card), a communications port, a Personal computerMemory Card International Association (PCMCIA) slot and card, wired orwireless systems, etc. Software and data transferred via communicationsinterface 2424 are in the form of signals 2428 which may be electronic,electromagnetic, optical or other signals capable of being received bycommunications interface 2424. These signals 2428 are provided tocommunications interface 2424 via a communications path 2426.Communications path 2426 carries signals 2428 and may be implementedusing wire or cable, fiber optics, a telephone line, a cellular link, aradio frequency (RF) link and/or other communications channels.

In this document, the terms “computer program medium” and “computerusable medium” are used to generally refer to media such as removablestorage drive 2414, a hard disk installed in hard disk drive 2412, andsignals 2428. These computer program products are means for providingsoftware to computer system 2400.

Computer programs (also called computer control logic) are stored inmain memory 2408 and/or secondary memory 2410. Computer programs mayalso be received via communications interface 2424. Such computerprograms, when executed, enable the computer system 2400 to implementthe present invention as discussed herein. In particular, the computerprograms, when executed, enable the processor 2404 to implement theprocesses of the present invention, such as the method(s) implemented asdescribed above. These processes may be performed automatically, orinvolve some form of manual intervention. Accordingly, such computerprograms represent controllers of the computer system 2400.

In an embodiment where the invention is implemented using software, thesoftware may be stored in a computer program product and loaded intocomputer system 2400 using removable storage drive 2414, hard drive 2412or communications interface 2424. the control logic (software), whenexecuted by processor 2404, causes processor 2404 to perform thefunctions of the invention as described herein.

In another embodiment, the invention may be implemented primarily inhardware using, for example, hardware components such as an integratedcircuit (IC) customized for a particular use, also known as applicationspecific integrated circuits (ASICs). Implementation of the hardwarestate machine so as to perform the functions described herein will beapparent to persons skilled in the relevant art.

In yet another embodiment, the invention is implemented using acombination of both hardware and software.

The invention is also directed to computer products (also calledcomputer program products) comprising software stored on any computeruseable medium. Such software, when executed in one or more dataprocessing devices, causes the data processing device to operate asdescribed herein. Embodiments of the invention employ any computeruseable or readable medium, known now or in the future. Examples ofcomputer useable mediums include, but are not limited to, primarystorage devices (e.g., any type of random access memory), secondarystorage devices (e.g., hard drives, floppy disks, CD ROMS, DVD ROMS, ZIPdisks, tapes, magnetic storage devices, optical storage devices, MEMS,nanotechnological storage device, etc.), and communication mediums(e.g., wired and wireless communications networks, local area networks,wide area networks, intranets, etc.). It is to be appreciated that theembodiments described herein can be implemented using software,hardware, firmware, or combinations thereof.

While various embodiments of the present invention have been describedabove, it should be understood that they have been presented by way ofexample, and not limitation. It will be apparent to persons skilled inthe relevant art(s) that various changes in form and detail can be madetherein without departing from the spirit and scope of the presentinvention. Thus, the present invention should not be limited by any ofthe above described exemplary embodiments, but should be defined only inaccordance with the following claims and their equivalents.

In addition, it should be understood that the figures and screen shotsillustrated in the attachments, which highlight the functionality andadvantages of the present invention, are presented for example purposesonly. The architecture of the present invention is sufficiently flexibleand configurable, such that it may be utilized (and navigated) in waysother than that shown in the accompanying figures.

Further, the purpose of the foregoing Abstract is to enable the U.S.Patent and Trademark Office and the public generally, and especially thescientists, engineers and practitioners in the art who are not familiarwith patent or legal terms or phraseology, to determine quickly from acursory inspection the nature and essence of the technical disclosure ofthe application. The Abstract is not intended to be limiting as to thescope of the present invention in any way.

1. A computer-implemented method for reconciling a custodial accountheld at a depository institution by a custodial agent on behalf of aplurality of individuals, wherein funds in said custodial account aredeposited in the aggregate from customer accounts belonging to saidplurality of individuals, comprising: receiving customer accounttransaction data relating to said customer accounts; a processorderiving custodial account balance data relating to said custodialaccount from said customer account transaction data and storing saidderived custodial account balance data; receiving custodial accountbalance data from said depository institution; said processor comparingsaid received custodial account balance data from said depositoryinstitution against said derived custodial account balance data;identifying discrepancies between said received custodial accountbalance data from said depository institution and said derived custodialaccount balance data; identifying a prospective write-off in the amountof one or more of said discrepancies; displaying said prospectivewrite-off to said custodial agent; and prompting said custodial agent toindicate whether said custodial agent accepts the prospective write-off.2. The method according to claim 1, further comprising: allowing saidcustodial agent to not accept the prospective write-off.
 3. The methodaccording to claim 1, wherein said prospective write-off is an offsetagainst an account.
 4. The method according to claim 3, wherein saidprospective write-off is an offset against a fee charged to saiddepository institution by said custodial agent.
 5. The method accordingto claim 1, wherein said custodial account is a deposit sweep account.6. The method according to claim 1, wherein said depository institutionis one of a network of banks at which deposits are held by the custodialagent on behalf of said plurality of individuals.
 7. The methodaccording to claim 1, wherein said custodial agent is an investmentbroker and said plurality of individuals are customers of saidinvestment broker.
 8. The method according to claim 1, furthercomprising: selecting said depository institution from a plurality ofdepository institutions at which deposits are held by said custodialagent on behalf of said plurality of individuals.
 9. The methodaccording to claim 1, further comprising: selecting said custodialaccount from one or more custodial accounts held at a plurality ofdepository institutions by said custodial agent.
 10. Acomputer-implemented method for auditing a custodial account held at adepository institution by a custodial agent on behalf of a plurality ofindividuals, wherein funds in said custodial account are deposited inthe aggregate from customer accounts belonging to said plurality ofindividuals, comprising: receiving customer account transaction datarelating to said customer accounts; a processor deriving custodialaccount balance data relating to said custodial account from saidcustomer account transaction data and storing said derived custodialaccount balance data; receiving custodial account balance data from saiddepository institution; said processor comparing said derived custodialaccount balance data against said received custodial account balancedata from said depository institution; identifying discrepancies betweensaid received custodial account balance data from said depositoryinstitution and said derived custodial account balance data; anddisplaying said discrepancies to said custodial agent.
 11. The methodaccording to claim 10, further comprising: identifying a prospectivewrite-off in the amount of one or more of said discrepancies.
 12. Themethod according to claim 11, further comprising: prompting saidcustodial agent to indicate whether said custodial agent accepts theprospective write-off.
 13. The method according to claim 12, furthercomprising: allowing said custodial agent to not accept the prospectivewrite-off.
 14. The method according to claim 11, wherein saidprospective write-off is an offset against an account.
 15. The methodaccording to claim 14, wherein said prospective write-off is an offsetagainst a fee charged to said depository institution by said custodialagent.
 16. The method according to claim 10, wherein said customeraccount transaction data comprises net daily deposit activity and netdaily withdrawal activity for said customer accounts.
 17. The methodaccording to claim 10, wherein said depository institution is one of anetwork of banks at which deposits are held by the custodial agent onbehalf of said plurality of individuals.
 18. The method according toclaim 10, wherein funds in said customer accounts are disaggregated andthen reaggregated in said custodial account.
 19. A computer programproduct comprising a computer usable medium having control logic storedtherein, said control logic comprising: first computer readable programcode means for causing a computer to compare account balance data from adepository institution for a custodial account held at said depositoryinstitution by a custodial agent on behalf of a plurality of individualsagainst account balance data for said custodial account derived fromcustomer account transaction data relating to customer accountsbelonging to said plurality of individuals, wherein funds in saidcustodial account are deposited in the aggregate from said customeraccounts; second computer readable program code means for causing thecomputer to identify discrepancies between said balance data from saiddepository institution and said derived balance data; third computerreadable program code means for causing the computer to identify aprospective write-off in the amount of one or more of saiddiscrepancies; and fourth computer readable program code means forcausing the computer to prompt said custodial agent to indicate whethersaid custodial agent accepts the prospective write-off.
 20. A computerprogram product comprising a computer usable medium having control logicstored therein, said control logic comprising: first computer readableprogram code means for causing the computer to derive account balancedata for a custodial account held at a depository institution by acustodial agent on behalf of a plurality of individuals from customeraccount transaction data relating to customer accounts belonging to saidplurality of individuals, wherein funds in said custodial account aredeposited in the aggregate from said customer accounts; second computerreadable program code means for causing the computer to compare saidderived account balance data against account balance data received fromsaid depository institution for said custodial account; third computerreadable program code means for causing the computer to identifydiscrepancies between said account balance data received from saiddepository institution and said derived account balance data; and fourthcomputer readable program code means for causing the computer to displaysaid discrepancies.
 21. The computer program product of claim 20,further comprising: fifth computer readable program code means forcausing the computer to suggest a write-off in the amount of one or moreof said discrepancies.
 22. The computer program product of claim 21,wherein said prospective write-off is an offset against an account. 23.The computer program product of claim 21, further comprising: sixthcomputer readable program code means for causing the computer to promptsaid custodial agent to indicate whether said custodial agent acceptsthe prospective write-off.
 24. The computer program product of claim 20,further comprising: fifth computer readable program code means forcausing the computer to prompt said custodial agent to select saiddepository institution from a plurality of depository institutions atwhich deposits are held by said custodial agent on behalf of saidplurality of individuals.
 25. The computer program product of claim 20,further comprising: fifth computer readable program code means forcausing the computer to prompt the custodial agent to select saidcustodial account from one or more custodial accounts held at aplurality of depository institutions by said custodial agent.
 26. Thecomputer program product of claim 20, wherein said customer accounttransaction data comprises net daily deposit activity and net dailywithdrawal activity for said customer accounts.
 27. Acomputer-implemented method for reconciling a balance of funds in acustodial account held at a depository institution by a custodial agenton behalf of a plurality of individuals, wherein funds in said custodialaccount are deposited in the aggregate from customer accounts belongingto said plurality of individuals, comprising: receiving customer accounttransaction data relating to said customer accounts; a processorderiving an expected balance of funds for said custodial account fromsaid customer account transaction data and storing said expected balanceof funds data; receiving balance of funds data for said custodialaccount from said depository institution and storing said receivedbalance of funds data; said processor comparing said expected balance offunds data for said custodial account against said received balance offunds data for said custodial account provided by said depositoryinstitution; identifying discrepancies between said expected balance offunds data and said received balance of funds data; identifying aprospective write-off; displaying said prospective write-off to saidcustodial agent; and prompting said custodial agent to indicate whethersaid custodial agent accepts said prospective write-off.
 28. The methodaccording to claim 27, wherein said customer account transaction datacomprises net aggregated deposits to said custodial account from saidcustomer accounts and net aggregated withdraws from said custodialaccount to said customer accounts.
 29. The method according to claim 27,wherein said balance of funds comprises principal and interest.
 30. Themethod according to claim 27, wherein said balance of funds comprisesprincipal, interest and fees.
 31. The method according to claim 27,wherein said custodial account is an insured deposit account.